Guillermo Budget Process
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- Date Submitted: 06/19/2011 07:20 PM
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Guillermo’s Budget Process
ACC/561
April 21, 2011
Ciro Immordino
Mr. Guillermo had everything he wanted, a thriving home and business in the sleepy community of Sonora Mexico, and he was the owner of Guillermo Furniture Store. Guillermo was a large furniture manufacturer who took advantage of a good supply of cheap labor and timber within his community. Unfortunately, by 1992 his business began to suffer due to situations outside of his control and Mr. Guillermo has watched his profit margins shrink, costs continue to rise, and losing customers to his competition (Guillermo Scenario, University of Phoenix, 2011).
The future of Mr. Guillermo’s business could be determined by the financial decisions he makes today. New competitors offer new technology and lower prices to customers, which could result in a significant change for Guillermo’s company. Guillermo’s management team must look at the current cost relationships and behaviors within Guillermo’s Furniture Store to determine the best way for the company to move forward.
The decisions Guillermo make
They must work together to determine alternative financial decisions and select the alternatives that best suit the company. A break-even analysis on the new product and current patented product will help the company make that decision. Guillermo will also be able to figure return on investment, economic value, and residual income in the decision making process.
Guillermo’s Managers must look at more than the traditional relationship of costs in the production of their furniture. The Managers must look at each activity required to produce a piece of furniture, known as an activity-based view of cost behavior, also consider the traditional relationship of material costs related to the production of the furniture, as well as the costs of manufacturing on a day to day basis (such fixed costs as rent, electricity and labor). To do this effectively they must identify cost drivers, outputs of resources or...
ACC/561
April 21, 2011
Ciro Immordino
Mr. Guillermo had everything he wanted, a thriving home and business in the sleepy community of Sonora Mexico, and he was the owner of Guillermo Furniture Store. Guillermo was a large furniture manufacturer who took advantage of a good supply of cheap labor and timber within his community. Unfortunately, by 1992 his business began to suffer due to situations outside of his control and Mr. Guillermo has watched his profit margins shrink, costs continue to rise, and losing customers to his competition (Guillermo Scenario, University of Phoenix, 2011).
The future of Mr. Guillermo’s business could be determined by the financial decisions he makes today. New competitors offer new technology and lower prices to customers, which could result in a significant change for Guillermo’s company. Guillermo’s management team must look at the current cost relationships and behaviors within Guillermo’s Furniture Store to determine the best way for the company to move forward.
The decisions Guillermo make
They must work together to determine alternative financial decisions and select the alternatives that best suit the company. A break-even analysis on the new product and current patented product will help the company make that decision. Guillermo will also be able to figure return on investment, economic value, and residual income in the decision making process.
Guillermo’s Managers must look at more than the traditional relationship of costs in the production of their furniture. The Managers must look at each activity required to produce a piece of furniture, known as an activity-based view of cost behavior, also consider the traditional relationship of material costs related to the production of the furniture, as well as the costs of manufacturing on a day to day basis (such fixed costs as rent, electricity and labor). To do this effectively they must identify cost drivers, outputs of resources or...